Tuesday, December 06, 2011

U.S. Car Industry Is Coming Back from the Dead

1. Guess What? The U.S. Car Industry Is Back From The Dead, and it will continue to get better (see video above). Reason? The average age of cars in America is now more than 10 years, compared to 6 years at the peak of the economic boom. This suggests that Americans will have to continue to buy new cars to replace the ones they have, which bodes well for future car sales.

Here's another reason that the U.S. car industry will expand output in the future:

It's the first time Toyota will export the U.S.-built Camry outside North America. Toyota faces cost pressures in Japan in assembling vehicles there because of the strength of the Japanese yen." (HT: Mike W.)

And car sales in China are booming for GM and Ford.

3. "GM today reported its November sales in China shot up at their fastest pace in ten months; Ford reported its sales in China are up 7 percent this year -- all proof that in these tough economic times, somebody somewhere is buying something. That would be: people in China are buying cars."

"This suggests that Americans will have to continue to buy new cars to replace the ones they have."

A miserable two-hour drive from Pittsburgh is a used car shop which scours the country for very recently used cars. So you can get a current model year vehicle, buy an extended warranty and save thousands and thousands of dollars off new. Like I said, the drive is miserable, but I see a lot of cars here with that dealer's sticker on them these days. I know I'll be going there when it's time to dump my 15 year old Jimmy and/or 10 year old Odyssey. So I'm wondering how strong the sales of new vehicles will be, given the rise of places like this. Especially since the price of new continues to rise dramatically. Over 30K for an average new Ford? Yikes.

Nicolas,If you read the post and watched the video, I think you'd see it's not about GM. It's not even about US ownership (state or private...see section on Toyota). It's about US made cars and Dr. Perry's undying optimism that the economy is turning around.

"In the past two months, everyone has been scratching their heads just how it is possible that the US manufacturing base continues to chug along at pre-recession levels even as the world all around America burns? Today, GM may have given the answer, courtesy of its monthly disclosure of car sales ... So, how does November channel stuffing stack up? As the chart below shows, at 623,666 cars, it is an all time absolute record, and represents about 3.5 times the total GM vehicles sold in November! It is also a 31k increase in the past month, and 85k cars more in inventory than in July. Because when economic growth at all costs is needed to demonstrate just how viable America is, and a semi-nationalized car marker is one of the only conduits to "generate" economic growth ..." -- GM Channel Stuffing Surges To All Time Record, ZeroHedge

"How do you funnel billions of dollars to your union pals at a time when the government is running record deficits? Easy, you just tuck the money into ObamaCare. According to a new Government Accountability Office report, the federal government has so far handed out $2.7 billion out of a $5 billion program squirreled away in ObamaCare ... lift the hood a little and this program looks more like a slush fund for Friends of Democrats ... Almost as soon as the program was announced, thousands of well-connected unions and government agencies rushed in to apply for the free money. As a result, the agency running the program had to stop accepting applications in May or risk running out of funds. And just look at who made the cut. According to figures obtained by IBD, 10 of the top 12 recipients are either unions or public employee groups. In fact, the biggest single recipient was the UAW Retiree Medical Benefits Trust, which alone grabbed more than 8% of all the funds handed out so far. Other union beneficiaries include the United Food and Commercial Workers, the United Mine Workers and the Teamsters." -- IBD

"President Obama’s “financial crisis responsibility fee” would tax banks, insurance companies and brokerage houses that have paid back their bailout money — and even some firms that never took a bailout — to pay the tab of irresponsible firms, namely the auto companies that still owe the government billions. “We also ask the largest financial firms — companies saved by tax dollars during the financial crisis — to repay the American people for every dime that we spent,” President Obama proclaimed in the Rose Garden two weeks ago. But the details of this “responsibility fee” in the 80-page plan the president submitted to the Joint Committee on Taxation makes it clear that this fee will only be on firms that have already repaid the TARP funds and likely on some firms who never took a dime of taxpayer money. The Obama plan argues disingenuously that “shared responsibility requires that the largest financial firms pay back the taxpayer for the extraordinary support they received.” Yet there is no responsibility, “shared” or otherwise, for the auto companies General Motors and Chrysler that still owe the taxpayer billions. In fact it gives GM and Chrysler a free ride to cave to the United Auto Workers’ demands for thousands more unionized workers, as GM recently did in sham “negotiations” with the union bosses. The White House “wants to make the nation’s largest banks pay for the losses incurred in the $85 billion auto bailout,” reports the Detroit News. What this really means is that ordinary Americans — “working-class folks” as politicians like to call them — will pay for the auto bailouts twice. Once through their tax dollars, and again when their banks and insurance companies pass on the cost of the “responsibility fee” through higher borrowing costs, higher policy premiums, and lower returns on savings and investment." -- Big Government

"Detroit's decline has been shocking. Sure, a lot of the blame goes to a generation of bad management. But the main reason for Detroit's decline is the greed of the industry's main union, the UAW, which priced the Big Three out of the market ... total pay and benefits for a full-time worker for the Big Three until recently averaged about $140,000 a year. The transplants? Just $80,000. Add in an estimated $2,000-plus per car for retiree health care and pensions for the Big Three, and the cost gap is huge. Two years ago, the Center for Automotive Research estimated that for every job created by a foreign transplant, 6.1 jobs were lost by the Big Three — many of them in Detroit. No city can take that much economic abuse." -- IBD

"General Motors Co.'s recent stock offering was staged to start paying back the government for its $50 billion bailout, but one group made out much better than the taxpayers or other investors: the company's union. Thanks to a generous share of GM stock obtained in the company's 2009 bankruptcy settlement, the United Auto Workers is well on its way to recouping the billions of dollars GM owed it — putting it far ahead of taxpayers who have recouped only about 30 percent of their investment and further still ahead of investors in the old GM who have received nothing. The boon for the union fits the pattern established when the White House pushed GM into bankruptcy and steered it through the courts in a way that consistently put the interests of the union ahead of many suppliers, dealers and investors — stakeholders that ordinarily would have fared as well or better under the bankruptcy laws. "Priority one was serving the interests of the UAW" when the White House's auto task force engineered the bankruptcy, said Glenn Reynolds, an analyst at CreditSights. The stock offering served to show once again how the White House has handsomely rewarded its political allies, he said." -- IBD

It is common practice to drain the gasoline (the energy source) out of cars after crash testing. It appears the government testing of the Volt did not follow normal crash testing protocol. The agency you accuse of glossing over the problem might just have caused the problem.

The Volt technology is new (the Volt is powered 100% by an ion-powered electric motor backed up by a gasoline-powered electric generator), so problems can be expected, but that does not mean you can ignore the knowledge you have gained from past experiences.

Any formal practical problem solving approach includes isolating the problem before you analyze it. So I ask you to use your excellent research skills and find out how many battery fires have occurred in Volts that have not been in accidents or crash tested.

I was in Wuhan in 1996 when the CEOs of a number of companies were meeting in China. The CEO of GM pointed out that the installed capacity was around 25% greater than demand and was slated to grow faster than demand. From what I have seen there is still far too much capacity. And Americans still own far too many vehicles given the production difficulties in the liquids fuel sector.

Why are people so willing to ignore reality and believe in a good story rather than simply take the time to look at the facts? With Europe on the verge of collapse, China due for a setback, and the American states, municipalities, and federal government on the edge of insolvency why should anyone get too excited about an industry that has far too much capacity?